Whilst spread betting is a popular investment vehicle, it’s often misunderstood by traders in terms of how it works.
In simple terms, spread betting is a relatively simple concept that allows traders to speculate on various financial markets and essentially profit even as the value of a particular asset class declines.
In this post, we’ll consider some of the basic spread betting strategies that can help traders to optimise their profits, whilst asking what role these techniques play in achieving success.
- Start Small and Scale your Efforts
Like most financial market endeavours, spread betting is best learned through practical application and the use of a demo trading account.
Once you start to trade for real, however, we’d recommend starting small and looking to scale your efforts as you gain additional knowledge and understanding of your chosen marketplace.
This helps you to cope with the margin-based nature of spread betting, as whilst it’s possible to earn far more than your original deposit you can also lose significantly more than you may be able to afford in some instances.
So, take time to hone your craft and refine your strategies over time, before increasing your financial commitment accordingly.
2. Tailor your Trades
Not all trades are created equal, whether you’re speculating on currency or looking to invest in stocks and shares.
With this in mind, you’ll need to tailor your trades in relation to the associated risk and reward, as this helps you to strike the ideal balance between optimising returns and safeguarding your capital.
Remember; the higher the risk, the higher the potential reward, and this means that you don’t need to invest as much money in order to achieve success. Conversely, you can invest more in instances where the risk is low, and it’s important to adopt this approach at all times.
3. Use Stop Losses
On a final note, we’d also recommend that you use stop losses as a way of managing risk and protecting your capital.
In simple terms, stop losses represent an automatic order to close a trading position at a specified point. This enables you to cap losses and prevent individual orders from spiralling out of control, whilst it affords you greater peace of mind when trading through the 24-hour forex market.
Ultimately, this helps to ensure that your trading capital spreads as far as possible, whilst minimising the type of catastrophic losses that undermine even the most talented of traders.
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